Central banks keep more gold at home as risks rise
More central banks are storing gold bullion domestically rather than abroad as they expect to buy more of the safe-haven asset amid rising geopolitical tensions.
These are among the findings of the World Gold Council’s annual Central Bank Gold Reserves survey.
The report found that despite the recent decline in prices during the Iran conflict, monetary authorities still view gold as an important hedge against inflation, geopolitical shocks and exchange rate risk.
Gold futures.
Central banks have purchased an average of 1,000 tons per year over the last four years; This is twice the average of the previous decade, according to the survey. Nearly nine in 10 central banks that responded said they expected global central bank gold reserves to increase next year, while 45% said they expected their own gold reserves to increase. Only 1% expects reserves to decrease.
The survey, conducted between February and May and based on responses from 74 central banks, also indicates that more central banks are choosing to hold a larger share of their gold domestically, rather than in more widely used venues such as the Bank of England or the Federal Reserve Bank of New York.
Gold spot prices.
A total of 9% of respondents said they had increased domestic storage in the past 12 months; This rate was 5% compared to the previous year. Another 10% said they were diversifying their overseas storage locations, compared with just 2% in last year’s survey.
Analysts say worsening geopolitical relations are driving the reassessment. Russia’s invasion of Ukraine and the subsequent freezing of nearly $300 billion of Russia’s foreign assets have raised concerns about how accessible reserves held abroad might be during times of political tension.
Why is the gold deposit approaching the house?
“Fear that assets will not be accessible from abroad has been pushing some central banks to repatriate gold held abroad since 2022,” UBS commodity analyst Giovanni Staunovo told CNBC.
Staunovo added that gold often carries symbolic importance as a national asset, creating an additional incentive to keep reserves domestically.
The French central bank has recently reduced risk by selling gold holdings in the United States and buying equivalent amounts in Europe without physically moving the bullion, he said.
“We expect central banks to purchase 750-1,000 metric tons of gold this year. Such demand alone may not raise prices sharply, but we believe it will provide a stable basis for the market and help offset weakening jewelry and investment demand,” Staunovo said. he added.
The World Gold Council’s survey found that 7% of respondents said they planned to increase domestic storage next year, while 9% expected to diversify their overseas storage arrangements, up from 2% in the last survey.
Dan Coatsworth, head of markets at AJ Bell, said the survey findings reflected a broader effort by central banks to reduce concentration both in their assets and where they hold assets.
“Just like any investment, it is prudent to spread the risks, and this includes where the assets are held,” he said.
